For the last two unregistered posters, here is a workround.
1) Leave the phone in restore mode and close iTunes.
2) Open up the device manager.
3) Scroll down to USB (Universal Serial Bus controllers..) and open that group.
4) Look for your iPhone. It should be the first device listed and will be called something like apple, restore, iphone or something that you'll recognize as the phone. 5) Right click it and choose update driver.
6) Tell the updater not to search for it, click next.
7) On next page choose install from a specific location. Click next.
8) In the 'Please choose your search and installation options' window,
choose 'Don't search. I will choose the driver to install' and click next
9) In the next window choose Have Disk and browse to the Mobile Device Support's driver folder.
10) Choose the restore driver it shows and finish up the driver updating.
If iTunes doesn't show your phone in restore mode next time you open iTunes then restart the Apple Mobile Device service and reopen iTunes.